Journal of Energy Markets

Risk.net

Predicting realized volatility for Nord Pool forward prices by including volatility spillover and covariance effects

Erik Haugom

ABSTRACT

In this study, the current literature on volatility prediction in financial electricity markets is extended by incorporating volatility spillover and covariance effects. This is done using the concept of realized volatility and covariance with three financial electricity contracts traded at the Nord Pool exchange. A recently developed robust method to separate the total variation into continuous and jump components is applied. The results indicate that volatility spillover and covariance effects are clearly present in the three different contracts. The prediction accuracy is improved significantly when utilizing a multivariate framework (vector autoregressions) rather than a univariate one.

 

 

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here